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The 6 Questions You Need To Answer Before You Retire

At the start of every new year, you might think to yourself,

“Is this the year I’m going to retire?”

The New Year embodies fresh starts and new beginnings, and it’s no surprise that visions of retirement (not sugar-plums) dance in your head. But before you turn that dream into reality, be sure you can answer these six questions.

1. Are you confident in your retirement number?

A top concern for retirees is having enough money to sustain their lifestyle throughout retirement. That “enough” number will shift for each couple depending on their unique needs. 

Your housing, location, activities, health, debts, and general lifestyle requirements will all factor into your retirement number. A globetrotting couple might need more money per month for flights, insurance, food, and lodging, than someone who takes a more conservative financial approach.

How can you discover your number? Start by building a retirement budget. You’ll need to include items like housing, food, utilities, internet, travel, transportation, entertainment, insurance, taxes, debts, charitable donations, and any other projected expenses. Add those costs up, and you’ll get a general idea of how much you project to spend each month/year. Remember, you’ll also need to consider your emergency fund and other large savings goals as well as inflation.  

Before you retire, it’s critical to know the number that will allow you to live the life you want. Knowing that number might mean that you delay retirement a year or two to build up savings in your 401(k), IRA, and other investments. You’ve been saving for decades and deserve to live the fulfilling life you’ve dreamed of. 

2. Have you made a plan for your taxes?

Tax planning is critical to a robust retirement plan. You’ve been paying taxes your whole life and it only gets more complicated once you’re in your golden years. Proactive tax planning can save you thousands of dollars each year and help keep your money working for you longer. 

While working, your taxes were automatically withheld from your paycheck but in retirement, it isn’t quite as straightforward. Each income channel is taxed in a different way, which means you need to know how each vehicle is taxed before you can implement the best strategies to pay them. 

Channels like Social Security, pension funds, and RMDs from 401(k) and Traditional IRA are taxed as ordinary income. You can elect to have taxes withheld from your Social Security checks and even your pension checks, depending on the distribution option you choose. Qualified withdrawals from your Roth accounts, like Roth IRA and Roth 401(k), aren’t taxable since you already paid taxes when you contributed to them. Other investment funds outside of tax-advantaged retirement accounts, like a brokerage account, are taxed at the capital gains tax rate. 

Making a plan for how to withdraw the funds from these various accounts in a tax-conscious way is imperative to helping you save money on your tax bill year to year and preserve the longevity of your investments. 

3. Are you and your spouse aligned on your plans?

Married couples have unique needs when it comes to retirement planning. One spouse may be ready to retire, whereas the other doesn’t want to leave the workforce. Perhaps you have different ideas of what constitutes a fulfilling and meaningful retirement life. 

It’s essential that both spouses are aligned on their retirement plans. This cohesion will bring balance, peace, and confidence to a complicated transition. Take some time to talk with your spouse about your needs and wants for retirement. Work together to craft your goals and vision for the future. When you are both working together toward a shared vision, it provides the support and accountability needed to help you both get there. 

4. What will your lifestyle look like?

Retirement lifestyle is too often conflated with significant retirement goals like an out-of-state move, a trip to Europe, or a large purchase. While those elements are important, they merely scratch the surface of your true lifestyle. 

Your retirement lifestyle isn’t just the glitz and glamour of not returning to the office, it moves much deeper than that to include your daily habits. What does an ordinary Wednesday look like? How will you intentionally fill your time? What will you do to stay active both physically and mentally? How can you strengthen current relationships and have the courage to start new ones?

The true meaning of your retirement lifestyle comes down to these smaller moments like coffee and donuts after church on Sunday, quiet mornings with your spouse reading a good book, volunteer work each week, dedicating time to a passion project, or encore career. 

Your big retirement goals play a role in your lifestyle, but the smaller ones play an even more significant one. Dedicate time to set smaller lifestyle goals for yourself, so you can build your dream retirement one day at a time. 

5. Is your health taken care of?

Healthcare costs are one of the most considerable line items on your retirement budget. Planning for your future health needs will help you and your spouse feel more confident and secure should an emergency arise. Be sure to talk through the following questions.

  • Do you have proper health insurance for retirement? (remain on your old or new employer’s plan, covered under your spouse’s insurance, or Medicare.)
  • Have you explored the right Medicare coverage for your needs? (Advantage plans, Medigap plans, prescription drug plans, etc.)
  • What is your plan for long-term care? (purchasing long-term care insurance, using investments, family caretaker, etc.)
  • How will you cover the costs? (health savings account, insurance, or other retirement investments)

As you can see, there are several particulars to think through when it comes to your health. Planning when times are good will bring security and clarity when either you or your spouse has a medical need.

6. Have you updated your estate plan?

It’s best to update your estate plan periodically, especially in the event of a significant life event—retirement certainly fits the bill. Before you retire, make sure that the following is in order.

  • You’ve discussed your estate plan with your spouse, children, and any other beneficiaries.
  • Both your medical directive and financial power of attorney are up to date and understand their responsibilities. 
  • You have named both primary and contingent beneficiaries on your retirement accounts, investments, property, bank accounts, etc. 
  • Your will is accurate and reflects your current financial situation. 
  • If you have a trust, that you are actively funding it. 
  • Your estate plan speaks to the legacy you want to leave behind like charitable efforts, inheritance structure, and other wishes for property and assets. 

Step by Step can help get you ready to retire.

Our team is passionate about assisting married couples on their journey to and through retirement. The questions above are a great starting point, and we can help you put your plans in motion, building a customized plan that helps you use your money to enhance your life

Are you ready to retire in 2021? Set up a call with our team today so we can help you implement a retirement plan that works for you and your family.